Inside India newsletter: Trump's poll setback fuels hope for U.S.-India trade deal by year end
A momentum shift in U.S.-India trade talks follows a downturn in Trump-era tariff policy, with experts signaling the deal could be finalized around the December G20 meeting as Washington seeks policy wins post-midterms. The backdrop includes renewed investor interest in India and hopes that exporting friction will ease, aided by a perceived close alignment between Trump and Modi. Analysts note tariffs as a political liability in the U.S., but a timely India pact could serve as a tangible achievement for Trump. The narrative also hints at broader market implications for India, including potential foreign inflows if buyers restore confidence. Overall, the outlook centers on a near-term breakthrough with implications for bilateral commerce and investor sentiment.
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Investors returned to Indian markets in November after being unsettled by energy prices and capital outflows, setting a more favorable context for a U.S.-India trade agreement.
Experts assert that negotiations are largely concluded and anticipate a final sign-off when Trump and Modi meet at the December G20 summit, framing the deal as a ‘gentlemen's agreement’ to close it.
The push for a deal is partly driven by Trump’s post-midterm need to claim policy wins; analysts say a U.S.-India pact could be marketed as a domestic achievement amid public concerns about cost of living.
Tariffs have been a focal issue, with analysts noting that while they influence households, a pact with India could blunt broader political criticisms of tariff policy.
The trade talks intensified after the Supreme Court blocked certain Trump tariffs, allowing India to demand more favorable tariff terms; discussions in October suggested the impasse was easing.
India’s Commerce Minister and other officials publicly signaled the talks were close to settlement, with Modi’s December visit seen as a strategic moment to formalize an agreement.
Beyond the bilateral talks, India is portrayed as an attractive hedge for global capital, with potential foreign inflows of around $115 billion if investor underweights are neutralized.